AI, Crypto and Climate Change are on a collision course

Shortages of energy are in the cards if lefist policies persist. Voters won't put up with it.

Artificial Intelligence has emerged as a major source of demand for electric power. As of 2022, data centres used an estimate 340 Terawatt hours of electric power, about 3% of global energy use. A typical large scale data centre (such as those now being built for AI) consumes about 20 to 50 Megawatts (175 to 440 gigawatt hours per year). AI adoption is causing a dramatic increase in the construction of large scale data centres and AI adoption is projected to grow by over 20% annually for the foreseeable future. AI is particularly energy intensive. A typical ChatGPT search consumes about ten times as much power as a similar Google search.

The market valuation of AI chip producer NVidia implies a market belief that demand for NVidia AI chips will continue to grow by at least 20% for two or three decades before levelling off and growing in line with global GDP. A 20% growth rate for 20 years means about a 38 fold rise in energy demand (1.2^20=38.33) to power those kinds of chips. If global power generation did not grow, AI power demand would exceed world generating capacity within that forecast period.

But AI is not the only growing source of demand for electric power. Cryptocurrency “mining” comprises another one using an estimated 110 Terawatt hours of power. Crypto bulls like Kathy Wood are betting client money (not her own) that Crypto will displace fiat currencies, an absurd thought but one with a lot of popular support. 110 Terawatt hours today is over 1% of global electricity generation. If Crypto does gain traction, it is not hard to imagine (as Wood seems to) that a tenfold rise in power demand would result.

Reality is less alarming. Crypto has all the earmarks of a fad, produces nothing of value, is less secure that Visa or Interac as a system of payment, and is plagued by the reality that even high-schoolers can create their own Crypto tokens. There are an estimate 19,000 Crypto tokens in use worldwide already, clear evidence that there is nothing special about Crypto. But for the next few years, Crypto demand for power is a growing global problem.

Renewables won’t be much help.

After decades of promotion by leftist governments and massive subsidies, so-called “renewables” solar and wind today produce a tiny fraction of global electric power.

In 2023, wind and solar accounted for less than 12% of world power output. Since 2004, global investment in “renewables” totaled over $4.5 trillion U.S. In the same interval, demand for oil, gas and coal kept increasing.

It should be obvious that “renewables” cannot displace fossil fuels and even more obvious that demand for cheap and reliable power to support AI growth will have to come directly or indirectly from fossil fuels unless there is a major increase in nuclear power generation. Sure, some data centres will be powered by solar farms or wind turbines supported by batteries, but even those will need to tap the grid when their demand cannot be met by the intermittent power from solar or wind even with some battery backup.

Leftist attempts to perpetuate the aphysical nonsense that claims CO2 causes climate change will fail under their own weight as more and more voters realize they have been had, and toss the “progressive” regimes out of office. The Crypto Ponzi scheme will run its course but ultimately fail when they run out of “greater fools” to peddle the scheme to, and AI will keep growing as will world economies.

The result? Attempts to keep the “green transition” alive will collide with reality, there will be periods of power outages and brown outs, and voters will vote in administrations who will solve the energy problem with cheap and reliable (and for that matter completely safe) coal, oil and natural gas power generation.

Democracy works, even if it voters get it wrong for a period of time when they are misled and misinformed by leftist leaders, but they eventually get it right when the leftist policies destroy their household budgets, they can’t afford to drive their cars or heat their homes, their businesses suffer repeated downtime during power outages and brown outs, while electricity prices keep rising as the mix turns to costly sources and governments like Trudeau’s keep raising their useless “carbon tax” . That trend is happening already but will turn from a trickle to a deluge as governments like Joe Biden’s and Justin Trudeau’s keep destroying opportunity for citizens to prosper in the name of “saving the planet”.

As an aside, the AI craze will benefit at least two classes of non-AI stocks: natural gas producers and natural gas pipelines. To generate the energy needed for dozens of large-scale data centers to support AI applications, natural gas will the the fuel of choice for many. Enbridge (ENB.TO), TC Energy (TCP.TO) and Pembina Pipeline (PPL.TO) should geta lift, as will Peyto (PEY.TO), Birchcliff (BIR.TO), ARC (ARX.TO) and NuVista (NVA.TO) in Canada and large U.S. gas players like Chesapeake (CHK) and EQT.